United States guides

What should I check before buying a business in the US?

Due diligence means independently checking three things before you sign: the financial records, the operations and the legal documents. In the US the checks that matter most cost the least and you can run them yourself — the seller's entity record with the secretary of state, a UCC-1 lien search of the state filing index, and a nationwide federal court and bankruptcy search through PACER. A separate set of checks creates liability for the buyer if you skip them: state successor liability for the seller's unpaid sales tax, Form I-9 records for employees you take on, and, where real property is involved, the environmental inquiry that CERCLA's liability protections depend on. Tax, employment and environmental exposure all turn on your state and your deal structure, so use an attorney and a CPA for those rather than a checklist.

By the bizflip team · Published 15 September 2026 · Facts checked 15 September 2026 · Sources listed below

Due diligence is the part of buying a business where you stop taking the seller's word for things. It means independently checking the financial records, the operations and the legal documents before you sign. Several of the most useful US checks are public, cheap and yours to run — the seller's entity record with the state, a UCC-1 lien search, a federal court and bankruptcy search. A second set is different in kind: skip them and you inherit the seller's problem by operation of law. This guide covers both, and flags where a rule is federal, where it is state-by-state, and where the US simply has no equivalent of a mechanism buyers coming from other markets expect.

The financials, independently

The key word is independently: collect and check the numbers yourself rather than accepting a summary the seller prepared. The Small Business Administration's guidance for buyers names the documents to work through — financial statements, tax returns, contracts and leases, the confidentiality agreement and letter of intent, the sales agreement, and any purchase price adjustment. Ask for at least three years, and longer if the business is cyclical. If you intend to finance the purchase, your lender will want the financial statements and federal returns anyway, so gathering them early does double duty.

• federal income tax returns, and state returns where the business files them;
• profit-and-loss statements and balance sheets;
• cash flow statements;
• accounts receivable and accounts payable aging;
• sales records, and merchant-processor or point-of-sale statements behind them;
• payroll registers and the general ledger.

Two questions run underneath all of it. Does the reported profit reconcile to the filed tax returns and the bank statements, or only to a spreadsheet? And how much of the quoted earnings depends on the seller personally — their relationships, their license, their unpaid hours? Earnings that include an owner working sixty hours a week for no wage are not earnings you inherit unless you work those hours too. You do not have to take the returns on trust either: the seller can use IRS Form 4506-T to request a transcript of the business's filed return, and can separately authorize you or your CPA on IRS Form 8821 to inspect and receive that confidential tax information directly. Use the authorization route rather than accepting a transcript the seller hands you — a document that has passed through the hands of the person it is meant to check is not the independent read this step exists to get.

Then ask what share of revenue the largest customers represent, which contracts are actually transferable, and what debts exist — payroll tax arrears especially, because those are the ones most likely to follow the assets.

The records you can search yourself

None of these requires a lawyer or the seller's permission. Run them before you spend money on advisers.

The UCC search is the one buyers most often miss, and the one that costs real money to miss. Under Article 9 of the Uniform Commercial Code, a financing statement over ordinary business personal property is filed centrally in the office the state designates — usually the secretary of state — while one covering timber to be cut, as-extracted collateral, or — where it is filed as a fixture filing — goods that are or are to become fixtures, is filed where a mortgage on the related real property would be recorded. Two things follow. First, there is no US equivalent of Australia's single national PPSR, and no single cheap nationwide search: you search state by state, so cover every state the business has operated in and every former legal name and trade name, not just the current one. Second, a clean central search does not clear fixtures — for those, check the county land records as well. Buying encumbered equipment without getting a UCC-3 termination on the record first is how buyers pay for the same forklift twice.

Two limits are worth carrying. Appearing on a government register does not make a business trustworthy; records rule things out, not in. And the US has no nationwide register of banned or disqualified company directors to search — corporate governance is state law, and for a typical Main Street seller the practical substitute is the court and bankruptcy search above plus the entity's own filings. In regulated sectors there are free nationwide federal exclusion lists worth searching even so: HHS-OIG's List of Excluded Individuals/Entities, because an excluded person or entity can receive no payment from federal health care programs for any item or service they furnish, order or prescribe, and the government-wide exclusion records in SAM.gov for federal contractors.

The lease, the licenses and the contracts

• The lease. Will the landlord consent to an assignment, or must you negotiate a new lease? For premises-dependent businesses this can decide whether the deal is worth doing, and consent usually carries conditions and a cost. In an asset sale the lease does not travel automatically — it has to be assigned, and consent is normally a closing condition. Commercial landlord-tenant law is state law, so have an attorney read the lease and the consent clause.
• Licenses and permits. The SBA's position is that most small businesses need a combination of federal and state licenses, and that states regulate a broader range of activities than the federal government does. Federally licensed activities include alcohol, firearms, aviation, broadcasting, mining and drilling, commercial fisheries, maritime transportation, and transportation and logistics. Some licenses can be transferred; many have to be reissued in your name, which makes it a closing-timeline problem as much as a compliance one. Check state, county and city requirements for your actual location rather than assuming the seller's set is complete — unlike Australia, where ABLIS gives one national lookup, there is no single US database to check.
• Supplier and customer agreements. Are they assignable, and do any of them contain an anti-assignment or change-of-control clause that gives the counterparty a veto or an exit?
• Equipment and vehicles. What does the business own outright, what is leased or financed, and are the titles clean?
• Inventory. What is on hand, what condition is it in, and how much is obsolete?
• Liabilities. Outstanding debt, plus the ones that do not look like debt: warranty and refund obligations, gift cards, customer deposits and unearned revenue.
• Intellectual property. Trademarks, domain names, software licenses and the customer list — confirm the seller owns what it is selling and that each item is actually inside the deal.

The employees

Start with the thing that surprises buyers who have read guidance written for other countries: no US statute automatically carries employment contracts and accrued service across when a business changes hands. There is no equivalent of Australia's Fair Work transfer-of-business rules or the UK's TUPE regulations, and no federal duty on the old employer to hand you its employment records. In most asset sales the seller's employment ends and the buyer makes fresh offers. What that leaves you with is a set of administrative duties rather than an automatic transfer.

• Form I-9. USCIS gives a successor employer two options for acquired employees: complete a new Form I-9 for each, treating them as new hires with the acquisition date as the start date, or keep the predecessor's forms — and an employer that keeps them "accept[s] responsibility for any errors or omissions on those forms." Sample the seller's I-9 file during diligence. It is a cheap review with real penalties behind it.
• WARN notice. Where an employer has 100 or more employees excluding part-timers, or 100 or more including part-timers who in aggregate work at least 4,000 hours a week excluding overtime hours, the federal WARN Act requires 60 days' written notice before a plant closing or mass layoff. In a sale the line is drawn at closing: the seller is responsible for notice for a closing or mass layoff up to and including the effective date of the sale, and the buyer for one after it. Ask your attorney whether your state has its own notice law on top.
• Wage records. The FLSA requires payroll records to be kept for at least three years, and the records wage computations are based on — time cards, wage rate tables, work and time schedules — for two years. Gaps are themselves a finding, and unpaid-overtime exposure is a common diligence discovery.
• Accrued time off. The FLSA does not require payment for time not worked, such as vacation, sick leave or holidays; the Department of Labor treats these as matters of agreement between employer and employee. So whether the accrued PTO on the balance sheet is a real liability depends on the seller's own policy and on state law. Read the handbook, not just the ledger.

The taxes you can inherit

There is no GST or VAT in the United States, so nothing resembling Australia's GST-free "going concern" concession applies, and there is no state duty on goodwill or business assets as such. What US buyers face instead is state sales tax — on the assets, and on the seller's arrears.

• Sales tax on what you buy. New York tells buyers plainly that if the business includes assets such as furniture or office equipment, "you must pay sales tax on them." Treatment varies state to state, so settle who bears it in the contract rather than at closing.
• Bulk-sale notice and successor liability. These are buyer-side duties with dates attached. In New York a purchaser must file Form AU-196.10 at least 10 days before paying for or taking possession of any business assets, whichever comes first; the department responds within five business days and notifies the purchaser of any amount due within 90 days. A purchaser who does not follow the procedure can be personally liable for the seller's unpaid sales tax, capped at the purchase price or the fair market value of the assets, whichever is greater. In California the buyer must generally withhold enough of the purchase price to cover the seller's outstanding tax, and is released from that obligation by obtaining a certificate showing nothing is due; withhold too little and the buyer can be personally liable for the amount that should have been withheld, up to the purchase price. Put these on the closing checklist.
• Structure. Buying the assets and buying the stock are different transactions with different tax and liability outcomes — see asset sale vs stock sale, which covers the purchase price allocation you will negotiate alongside price.
• Real property. If the deal includes real estate, ask your attorney what state and local transfer taxes and recording fees apply where the property sits. There is no national rate. Some states also levy transfer tax when a controlling interest in an entity that owns real property changes hands, so ask about it on a stock purchase too, not just on a direct purchase of land.

If real property comes with the business

Buying land or a building opens a separate diligence track with a hard deadline. Under CERCLA, the innocent landowner, contiguous property owner and bona fide prospective purchaser liability protections each require the buyer to have conducted "all appropriate inquiries" into the property's environmental condition. The EPA states that all appropriate inquiries must be conducted or updated within one year before the date of acquisition, with certain activities completed within 180 days before acquiring ownership, and that ASTM International Standard E1527-21 — the Phase I Environmental Site Assessment — can be used to satisfy the statutory requirement; where the real property is forestland or rural property rather than a commercial site, the corresponding standard EPA recognizes is ASTM E2247-23. This is one of the few diligence steps where being late is as bad as not doing it at all, because the protection simply is not available afterwards.

If it is a franchise

The FTC's Franchise Rule gives you one firm right, and it is a reading period. The franchisor must furnish its current disclosure document at least 14 calendar days before you sign a binding agreement or pay any consideration, and if the franchisor unilaterally and materially alters the terms of the basic franchise agreement or any related agreements, it must give you revised copies at least seven calendar days before you sign the revised version. Changes that arise out of negotiations you initiated do not trigger that seven-day period. Use the 14 days to have a franchise attorney read the document rather than treating the period as a formality.

What federal law does not give you is a cooling-off right. There is no US equivalent of the 14-day post-signing termination and refund right Australian franchisees have under the Franchising Code of Conduct, and no federal duty on the franchisor to tell you to get independent advice. Once you have signed, the Franchise Rule's protection has been spent. Some states impose their own registration and disclosure duties on franchisors, so ask what applies where you are buying. One naming point: the SBA's buyer guidance still refers to a "Uniform Franchise Offering Circular," but the document the Franchise Rule requires is the franchise disclosure document, and that is what to ask for by name.

The customer data you are buying

There is no single federal privacy statute covering ordinary small-business customer records, so what binds you depends on where the customers are. California's law is the most developed of them. The CCPA only binds a business with annual gross revenue over $26,625,000 — the statutory $25 million figure as adjusted for inflation by the California Privacy Protection Agency, effective 1 January 2025 and adjusted again every odd-numbered year — or one that buys, sells or shares the personal information of 100,000 or more consumers or households a year, or one that derives half its revenue from selling or sharing personal information, so most Main Street targets sit outside it. Where it does apply: under the CCPA, transferring personal information as an asset that is part of a merger, acquisition, bankruptcy or other transaction where the third party assumes control is not treated as a "sale" — provided the information is used or shared consistently with the statute. If the acquirer materially alters how it uses or shares that information in a way materially inconsistent with the promises made when it was collected, it must give consumers prior notice of the changed practice. Read that as a limit on what the list is worth: if you priced it expecting to market in ways the seller never disclosed, some of that value is not there. A growing number of states now have comprehensive consumer privacy laws in effect — Indiana, Kentucky and Rhode Island were the most recent, taking effect on 1 January 2026 — most of them carrying similar merger carve-outs, so the answer turns on where your customers are rather than on where you are.

During diligence, expect redaction and do not fight it. There is rarely a reason to see identified customer or employee records to answer a question that aggregate figures answer, and asking for them creates exposure on both sides of the table.

What due diligence cannot tell you

Records show what has happened, not what will. They will not tell you whether the largest customer stays once the founder leaves, or whether the seller's personal reputation was the actual product. Where the seller permits it, talk to customers, employees and neighboring owners, and treat what you hear as evidence rather than color.

Then price what you found. Every unresolved item is one of five things: a reduction in price, a closing condition, a representation and indemnity from the seller, an escrow holdback, or a reason to walk. Nothing here is legal, tax or financial advice — the point of it is to arrive at your attorney's and your CPA's offices with the right questions and the documents already in hand. Our US guides cover the rest of the process; how to sell a business in the US shows the same deal from the other side of the table, and buying a business with an SBA 7(a) loan covers the lender diligence that runs on top of your own. Businesses currently listed show the level of disclosure to expect before you sign.

Sources

Every load-bearing claim in this guide, and where it comes from:

• SBA guidance for buyers of an existing business: due diligence documents include the letter of intent, confidentiality agreement, contracts and leases, financial statements, tax returns, the sales agreement and any purchase price adjustment; buyers must get needed licenses and permits from the current owner or apply themselves; environmental regulations matter where real property is included; franchise buyers should review the offering document. The page still refers to the "Uniform Franchise Offering Circular". — U.S. Small Business Administration
• Form 4506-T is used to request a tax return transcript, tax account transcript, wage and income transcript, record of account or verification of non-filing. — IRS
• Form 8821 is used to "authorize any individual, corporation, firm, organization, or partnership you designate to inspect and/or receive your confidential information verbally or in writing for the type of tax and the years or periods listed on the form." — IRS
• A federal tax lien is the government's legal claim against property when a tax debt is unpaid; it attaches to all business property and to all rights to business property, including accounts receivable, and the IRS files a public Notice of Federal Tax Lien to alert creditors. — IRS
• UCC Article 9 filing office: a financing statement covering as-extracted collateral or timber to be cut, or filed as a fixture filing covering goods that are or are to become fixtures, is filed in the office designated for recording a mortgage on the related real property; in all other cases — including a financing statement covering the same goods that is not a fixture filing — it is filed in the central filing office designated by the state. — Cornell Legal Information Institute (UCC § 9-501)
• Texas Secretary of State UCC fees: Debtor Search Certificate $15.00; web inquiry $1.00 per search; plain copies $0.10 per page. — Texas Secretary of State
• "Free online access to over 17 million corporate, limited liability company and limited partnership images is available online at bizfileOnline.sos.ca.gov"; a business entity search returns entity name and number, formation or registration date, status, standing, jurisdiction, addresses, agent for service of process, and officer, director, member and manager names. — California Secretary of State
• The PACER Case Locator searches a nationwide index of federal court cases and allows a user to search all courts — appellate, bankruptcy and district — for cases. — PACER, Administrative Office of the U.S. Courts
• PACER fees: $0.10 per page; "You won't be charged more than $3 per document"; but for searches, "Anytime a search is performed you are charged a fee based on the number of pages generated in the search, even if the search displays 'no matches found.' There is no maximum fee for these searches" — the $3 cap also does not apply to non-case-specific reports or court transcripts. "Spend $30 or less on court records in a quarter and fees are WAIVED". — PACER, Administrative Office of the U.S. Courts
• HHS-OIG's List of Excluded Individuals/Entities is a free, publicly searchable nationwide database; "Those that are excluded can receive no payment from Federal health care programs for any items or services they furnish, order, or prescribe", and employers who hire an excluded person may be subject to civil monetary penalties, so entities are encouraged to check the list routinely for new hires and current employees. — U.S. Department of Health and Human Services, Office of Inspector General
• FAR 9.404: the General Services Administration "[o]perates the web-based System for Award Management (SAM), which contains exclusion records" for entities "debarred, suspended, proposed for debarment, voluntarily excluded, declared ineligible, or excluded or disqualified under the nonprocurement common rule", and "SAM is available via https://www.sam.gov". — U.S. General Services Administration (FAR 9.404)
• Most small businesses need a combination of licenses and permits from both federal and state agencies; federally regulated activities include agriculture, alcoholic beverages, aviation, firearms, fish and wildlife, commercial fisheries, maritime transportation, mining and drilling, nuclear energy, radio and television broadcasting, and transportation and logistics; "States tend to regulate a broader range of activities than the federal government" and requirements depend on state, county and city. No single national license lookup is provided. — U.S. Small Business Administration
• A successor employer that acquires or merges with another company has two options for acquired employees' Form I-9: complete a new Form I-9 for each employee using the effective date of the acquisition or merger as the first day of employment, or retain the previously completed Form I-9 — and "Employers who choose to keep the previously completed Form I-9 accept responsibility for any errors or omissions on those forms." — U.S. Citizenship and Immigration Services
• WARN definition of employer: "Any business enterprise that employs 100 or more employees, excluding part-time employees", or 100 or more employees including part-time employees who in the aggregate work "at least 4,000 hours per week, exclusive of hours of overtime". — Cornell Legal Information Institute (20 CFR § 639.3)
• "an employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice"; in a sale of part or all of a business, the seller is responsible for notice of any plant closing or mass layoff up to and including the effective date of the sale and the buyer is responsible for notice of any occurring after the effective date. — Cornell Legal Information Institute (20 CFR § 639.4)
• "Each employer shall preserve for at least three years payroll records, collective bargaining agreements, sales and purchase records"; "Records on which wage computations are based should be retained for two years, i.e., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages." — U.S. Department of Labor, Wage and Hour Division
• "The Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations, sick leave or federal or other holidays"; "These benefits are matters of agreement between an employer and an employee (or the employee's representative)." — U.S. Department of Labor
• New York guidance to buyers of a business: file Form AU-196.10 at least 10 days before paying for the business or any assets; "If the business you are buying includes business assets such as furniture or office equipment, you must pay sales tax on them"; if the seller owes sales tax the department sends Form AU-196.2 and the buyer should not pay the seller until notified the taxes are paid. — New York State Department of Taxation and Finance
• New York bulk sales procedure: a purchaser must notify the Tax Department by filing Form AU-196.10 at least 10 days before paying for or taking possession of any business assets, whichever happens first; the department responds within five business days (Form AU-197.1 or AU-196.2) and notifies the purchaser of unpaid tax within 90 days. — New York State Department of Taxation and Finance (Tax Bulletin ST-70)
• New York successor liability on a bulk sale: a purchaser "who fails to withhold such consideration will become personally liable for any sales and use taxes owed by the seller, transferrer or assignor at the time of the sale up to the greater of the selling price or fair market value of the business assets transferred", and "[a] purchaser's, transferee's or assignee's failure to notify the department of a bulk sale of business assets will not relieve him of his obligation to withhold and pay over the sale proceeds or fair market value of the assets acquired." — Cornell Legal Information Institute (20 NYCRR § 537.3)
• California: "Generally, the buyer of a business or stock of goods must withhold a sufficient amount from the purchase price to cover the seller's outstanding liability taxes, fees, surcharges, and assessments (taxes), including interest and penalties, if any"; "The buyer will be released from their obligation to withhold the purchase price if they obtain a Certificate of Payment from us stating that no taxes, including interest or penalties, are due from the seller"; a buyer who withholds too little "may be held personally liable for the amount that should have been withheld up to the purchase price of the business or stock of goods". — California Department of Tax and Fee Administration (Publication 74)
• New York's real estate transfer tax reaches "the transfer or acquisition of a controlling interest in any entity with an interest in real property", with consideration measured by the fair market value of the real property apportioned to the ownership interest transferred — so a transfer of entity interests can trigger transfer tax without a direct conveyance of land. — New York State Department of Taxation and Finance
• "All Appropriate Inquiries, or AAI, is the process of evaluating a property's environmental conditions and assessing potential liability for any contamination"; the innocent landowner, contiguous property owner and bona fide prospective purchaser CERCLA liability protections require it; "AAI must be conducted or updated within one year before the date of acquisition of a property", with certain activities "within 180 days before acquiring ownership"; ASTM International Standard E1527-21 (Phase I Environmental Site Assessment) and ASTM E2247-23 (Phase I Environmental Site Assessment Process for Forestland or Rural Property) are consistent with the final rule and "can be used to satisfy the statutory requirements for conducting AAI". — U.S. Environmental Protection Agency
• FTC Franchise Rule: it is an unfair or deceptive act to "fail to furnish a prospective franchisee with a copy of the franchisor's current disclosure document ... at least 14 calendar-days before the prospective franchisee signs a binding agreement"; where the franchisor "unilaterally and materially alters the terms and conditions of the basic franchise agreement or any related agreements" it must furnish revised copies "at least seven calendar-days before the prospective franchisee signs the revised agreement", and "[c]hanges to an agreement that arise out of negotiations initiated by the prospective franchisee do not trigger this seven calendar-day period." Part 436 provides no post-signing cooling-off or rescission right and no duty to advise the franchisee to obtain independent advice. — Cornell Legal Information Institute (16 CFR § 436.2)
• The Franchise Rule and the FTC's compliance materials for it, confirming the required document is the franchise disclosure document. — Federal Trade Commission
• CCPA, Civil Code § 1798.140(ad)(2)(C): "sell" does not include a business transferring "to a third party the personal information of a consumer as an asset that is part of a merger, acquisition, bankruptcy, or other transaction in which the third party assumes control of all or part of the business, provided that information is used or shared consistently with this title"; "If a third party materially alters how it uses or shares the personal information of a consumer in a manner that is materially inconsistent with the promises made at the time of collection, it shall provide prior notice of the new or changed practice to the consumer." — California Legislative Information (Civ. Code § 1798.140)
• CCPA applicability thresholds, Civil Code § 1798.140(d)(1): a "business" is one that, in the preceding calendar year, had annual gross revenues over $25,000,000 "as adjusted pursuant to subdivision (d) of Section 1798.199.95"; or alone or in combination annually buys, sells, or shares the personal information of 100,000 or more consumers or households; or "[d]erives 50 percent or more of its annual revenues from selling or sharing consumers' personal information." — California Legislative Information (Civ. Code § 1798.140(d)(1))
• California Privacy Protection Agency CPI adjustment: the annual gross revenue amount within the definition of "business" is updated from $25,000,000 to $26,625,000, "Effective 1/1/2025"; and "Every odd-numbered year, Civil Code § 1798.199.95(d)" adjusts those monetary thresholds to reflect increases in the Consumer Price Index. — California Privacy Protection Agency
• The IAPP's US State Privacy Legislation Tracker maps comprehensive consumer privacy bills and enacted laws state by state across the legislative process (state-by-state detail is behind membership). — International Association of Privacy Professionals (US State Privacy Legislation Tracker)
• Comprehensive state privacy laws in Indiana, Kentucky and Rhode Island took effect on 1 January 2026: "The expected momentum stems from 1 Jan. effective dates for a slate of California privacy measures and comprehensive privacy laws in Indiana, Kentucky and Rhode Island." — International Association of Privacy Professionals

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